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MIGRATION – CHALLENGES AND
POLICIES
These changes have already had important effects on
the labor markets of European countries, affecting
the balance between young and old workers and on
the public sector costs, by challenging the sustainability of the pension systems.
IMMIGRATION AND EUROPE’S
DEMOGRAPHIC PROBLEMS:
ANALYSIS AND POLICY
CONSIDERATIONS
International migrations are also deeply affected by
the evolution of world demographics. On one hand
the migration pressures on Europe depend and will
depend on the demographic dynamics of its neighbors (Africa), which are quite different from the demographics of Asian and Latin American countries.
On the other hand immigration will affect the age
structure and the population dynamics of Europe in
ways that have important economic consequences.
In this paper I analyze four important ways in which
international migrations interact with demographic
phenomena and affect their economic consequences.
I will also point at important policy implications for
Europe.
GIOVANNI PERI*
Introduction
A country’s demographics have important bearings
on its economy and society. In Europe the decline of
birth rates and the increase in life expectancy have
already produced two important consequences.
First, in many European countries the total population has been growing very slowly in the last decade
or it has been stagnant. Second, the proportion of
people who are “old” (65 and older) is rapidly growing, while the proportion of young people (30 or
younger) is shrinking. While these dynamics are at
work in most developed countries, in Europe they
are particularly stark. Table 1 shows the percentage
of population 65 and older in some representative
European and North American countries. It is clear
that European countries have aged much faster than
North American ones during the last 30 years. As of
2010 the percentage of population 65 and older
was over 20 percent in Germany and Italy and only
12 percent in the US.
• First, the demographic transition in developing
countries themselves, combined with the “life
cycle” of migrants, (higher probability of migrating when young and low probability when old)
will affect the emigration rates. In some developing countries (especially in Asia and Latin America) the transition from higher to lower fertility
rates has already happened. In others (mainly in
Africa) it is only at the beginning. These discrepancies will affect the composition of world migrants. In the coming decades, for geographical
and historical proximity to Africa, immigration
pressures are likely to be higher in Europe than in
North America.
Table 1
Population aged 65 and older as share of total in %
Representative countries of Europe and
North America
US
Canada
France
Germany
Italy
1980
2010
11.2
9.5
14.1
15
13.4
12.4
14.1
16.8
20.7
20.2
• Second, the inflow of immigrants, who are younger and have higher fertility relative to natives, affects the age composition and the rates of population growth of receiving European countries. If
European countries let them in, young immigrants would increase the ratio of working to retired people and hence the sustainability of the
pension systems. In the labor markets, they will
provide the skills and the abilities for jobs to be
performed by young workers, keeping high the
demand for complementary jobs performed by
Source: Author's calculations based on UN population data.
* UC Davis and CESifo.
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half was coming from less developed countries. For
Europe, immigration from other rich countries is
mainly intra-European mobility and therefore not
subject to immigration policy restrictions. Immigration from poor countries is in large part from Africa
and, I will argue, it will be even greater in the future.
Before analyzing how immigration may interact with
the demographic pressures in Europe let us analyze
how the composition of immigrants from poor countries will be affected by demographic transition in
countries of emigration. Future European immigration policy should account for the shifting flows of
world migrants.
older native workers. More open and work-oriented immigration policies would allow European countries to attenuate the economic consequences of ageing and their population decline.
• Third, the ageing of the citizens of European countries and the shift in their sources of income from
labor (working) to capital (returns on pension
funds) should change their attitudes towards immigrants. Older people living off investment income and public pension income (funded with
taxes on active workers) should see working immigrants as less of a threat and more as an economic
benefit for themselves. However, economic and sociological research also shows that older people
fear immigrants and diversity more than younger
people. As politicians may cater to these fears it
will be even more important to bring solid economic consideration, rather than ideology, to the center of the debate. This will be needed in order to
muster the political support for more open and
work-oriented immigration policies which would
significantly benefit the ageing native population.
Demographic transition in developing countries
and future immigrants to Europe
In an interesting recent article Hatton and Williamson (2009) argue that for most “third world” countries the emigration rates (net emigrants relative to
the initial population) reached a peak during the late
1980s and early 1990s. They have been stable or even
declining since then. Dividing the world into three
large areas of emigration, Africa, Asia and Latin
America they show that for the last two regions emigration rates have been declining during the 2000s.
The reason, they argue, was mainly demographical.
Many Asian and Latin American countries have experienced a rapid decline in the size of their birth
cohorts beginning in the 1980s.2 The smaller cohorts
reached their early working age, which is typically
the time of emigration, during the 1990s and the
2000s. As smaller cohorts reached their working age
and larger cohorts got older, net emigration rates declined. In contrast many African countries have not
experienced the demographic decline yet (Table 2)
and hence their emigration rates have not peaked.
Migration rates exhibit some inertia. As previous migrants attract new migrants via network and family
effects the inversion of migration rates (from growing to declining) may be slowed when fundamentals
changes. However Hatton and Williamson (2009)
argue that there is strong evidence that the cycle of
migration from Latin America and Asia has peaked:
the young cohorts are smaller and the income of
those countries has been growing, thereby reducing
the income gap. In contrast the cycle of emigration
from Africa is only at the beginning as those coun-
• Finally the quality of life of ageing individuals in
rich countries and the labor participation of
women in the family (especially of those who
attend the needs of elderly parents) can be positively affected by the presence of immigrants. In
several countries, especially in southern Europe,
large part of the home and health services directed to the elderly is performed by immigrants.
They fill a large demand gap in those services.
Lacking an appropriate inflow of immigrant workers, the services to older people would be performed mainly by stay-at-home women, affecting
their labor force participation and their retirement
decision.
In the rest of the paper I will develop each of these
points in detail.
Focus on immigration from poor countries
As of 2009 the United Nations1 estimated that 10 percent of the population residing in an OECD country
(and 9 percent of those in European countries) were
born abroad (immigrant). While a significant part of
this mobility originated from other developed countries (up to 50 percent in some countries), more than
2
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See Table 2 for some comparisons in the size of the birth cohorts
in 1970 and 2000 across some representative emigration countries.
Notice the much smaller size, in 2000 of the birth cohorts in Asian
and Latin American countries, relative to African countries.
United Nations (2009).
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Table 2
Table 3
Birth cohort (age 0–4) as percentage of the population
Representative countries of origin
China
India
Philippines
Mexico
Senegal
Nigeria
1970
2000
10
14.4
16.4
17.6
18.4
17.1
5.6
10.7
12.6
9.6
16.5
16.1
Percentage abroad and emigration rates of the
Mexican male population
1970
1980
1990
2000
2005
Source: Author’s calculation based on UN population
data.
Share of
Mexicans
abroad
Net emigration rate
of Mexicans during
the following decade
1.0
2.6
7.6
8.4
10.2
1.9
5.4
2.0
2.2
–
Source: Author’s calculations based on Mexican
census data.
tries are escaping dire poverty (which traps people
into the country) and still have high fertility rates.
cumented and undocumented emigrants). It is the
percentage of people born in Mexico who moved
abroad during each decade between 1970 and 2000
and between 2000 and 2005. This rate peaked in the
1980s with more than 5 percent of the Mexican population moving abroad during that decade alone. In
the following decades (1990s and 2000s) the net emigration rates were much lower (around 2 percent).
The size of the birth cohorts in Mexico between 1950
and 2000 peaked before 1970 and has declined since
then. Hence, as also pointed out by Hanson and
McIntosh (2010), the decline of immigration rates
corresponds to the year when smaller birth cohorts
were reaching working age (16–20 years of age).
Therefore the lower emigration rates during the
1990s and the 2000s (and even more in the future
decades) have a simple explanation: fewer Mexicans,
were in the age bracket with a high risk of net emigration. The Figure shows the percentage of emigrants in each male five-year cohort born in Mexico
between 1946 and 2000. It is clear that for each cohort the largest emigration rates (increase in emigrants as percentage of the group) was observed
This simple difference in the demographic profile of
world regions will change the composition of world
migrant flows. Fewer Asians and Latin Americans
will emigrate and more Africans will. Why is this
important for European countries? Because for
geographic and historical (colonial) reasons this
means that Europe will be more likely than North
America to be on the receiving end of the future
migration flows. Similarly, this means that the economic future of Africa will affect migratory flows.
In the early phases of economic development, growth
in income per person is associated with larger migration rates. Fast economic growth in Africa may
imply larger migration of young people from that
region to Europe.
In order to illustrate the relationship between demographics in sending countries and emigration rates it
is instructive to consider, briefly, the case of emigration from Mexico. During the last four decades Mexico-US has been the largest migration corridor in the world. It
Figure
involves short-distance migration
MEXICAN MALE COHORTS
between a middle income and a
Percentage abroad
high income country. This situa0.30
tion is similar to that between Eu0.25
rope and North Africa and hence
this case may contain a lesson
0.20
concerning the effect of demography on emigration, which can
0.15
be useful for Europe. Mexico in
the 1970s was not very different
0.10
in terms of demographics and development level to present day
0.05
North Africa.
Born
1946–1950
1951–1955
1956–1960
1961–1965
1966–1970
1971–1975
1976–1980
1981–1985
0.00
Table 3 shows the net emigration
rates of Mexicans (including do-
15–19
20–24
25–29
30–34
35–39
40–44
45–49
50–54
55–59
Source: Author's calculations on data from the Mexican census 1960, 1970, 1990 and 2000.
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between the age of 15 and 35. After 40 the percentage of residents abroad does not increase, and sometimes it decreases (return migration). Hanson and
McIntosh (2010) show that the simple demographics
described above explain more than 40 percent of the
increase in emigration rates from Mexico to the US
in the period 1970–2000.
immigrants will eventually age making this a transitional effect. However, delaying the increase in the
dependency ratio can be important to allow a less
drastic reduction in pension benefits and increase in
pension age during the transition period.
Most recent estimates find small positive fiscal effects4
of immigrants in countries with small welfare systems
such as the US (Smith and Edmonton 1997) and small
negative effects in countries with more generous welfare systems (Rowthorn 2008). However in countries
that are rapidly ageing, the contribution of immigrants, who pay into the social security system but will
not draw from it for a while, is much larger than their
cost. Moreover, for European countries such as Spain,
Italy and Greece in which the burden of public debt
per capita is high the growth of total GDP (not just
per capita) is crucial to maintain the sustainability of
the debt. Total GDP growth is helped by immigrants.
One interesting policy would be to add on an extra fee
for immigrants' contributions to the public pension
system. This would make more transparent their subsidization of the older citizens (currently they subsidize pensions in a pay-as-you-go systems just as a
virtue of their age distribution). Also, in order to make
politically feasible the increase in the number of temporary and permanent immigrant work visas, governments could charge significantly higher fees. More immigrants will be able to enter Europe and work legally, thereby generating larger inflows of tax revenues
for the public pension system and for the receiving
government. We think that a significant increase in the
quota of work visas together with an increase in the
immigration fees would bring those beneficial effects
and be politically more feasible.
Countries like Senegal, Nigeria and Congo (Table 2)
have only recently reached the peak of their birth
cohort size. The existing network of migrants from
these countries in Europe and the recent growth in
the African economies may generate in the coming
decades a flow of migration to Europe similar to the
one from Mexico to the US during the 1980s and
1990s. European policy makers should therefore be
prepared to plan for these increasing pressures. Immigrants from these countries can be absorbed much
better if they are allowed to enter on working visas.
This would reduce the incentive to undocumented immigration. Increasing the inflows of documented, productive, young immigrant workers would also increase their contribution to the economy and to the
pension system. An important step will be to involve
African countries in negotiations about number of
visas, type and enforcement of immigrant laws. More
work visas can be negotiated with African countries
in exchange for common action to keep immigration
legal. Demographic pressures are slow and predictable and hence European countries should begin planning accounting for these changes.
Immigrants and age structure in Europe
The increased immigration pressure from Africa, with
its young population, and the low fertility in Europe
have two interesting consequences on the population structure of European countries. First, a large
share of the population growth in European countries could be driven by immigrants. Already during
the 1990s, immigrants represented around 35 percent
of the net population growth in Germany and the
UK and about 40 percent of net population growth
in the Sweden and Ireland.3 For some countries,
whose native population is already in decline (e.g.,
Italy) immigration was the only component, during
the last decade, that partially offset this decline. Second, the inflow of immigrants will slow down the relative growth of the dependency ratio (number of people retired relative to working population). Young
Younger immigrants can also help productivity and
the wages of natives in the labor markets. The difference in age profile between immigrants and natives
is a dimension of skill complementarities5 that may
help native workers. As the labor supply of older relative to younger workers increases in European countries, this will depress the wages and employment
opportunities of older workers. Card and Lemieux
(2001) show how the large size of young cohorts depressed wages for young workers in the 1970s in the
US. The same effect may happen for older cohorts in
Europe in the 2000s. Immigrants could attenuate this
effect by filling jobs and occupations that need youn-
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The net fiscal effect of immigrants is the difference between what
they pay in taxes and what they receive in public benefits.
5 These complementarities are emphasized in Ottaviano and Peri
(2012) and in Peri and Sparber (2009).
See Docquier et al. (2010).
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sion systems. The shift towards less generous benefits, fully-funded systems and higher retirement age
is inevitable. The question is how drastic and rapid
the change must be in order to ensure sustainability.
I have already mentioned how the younger age of
immigrants and a system based on larger immigration fees and a larger quota for working visas can
help the transition. There is an additional effect of
immigration that could be quite relevant, especially
for southern European countries.
ger workers and complement the productivity of
older workers who would retain more supervisory
and organizational roles. Increasing the number of
work visas for young immigrants would, therefore,
also help alleviate the age imbalance on the labor
market.
Ageing and immigration policies
Demographics may also play a role in shaping the
opinion of natives about immigration. From an economic and fiscal point of view immigration is likely
to benefit mostly older workers and retirees. Immigrants help pay for their pensions and provide labor
that increases the productivity of capital (mostly
owned by older people). They rent their houses and
complement their skills on the labor market. Based
on economic calculations the elderly should be particularly well disposed towards immigrants. On the
contrary, most surveys and studies (e.g., Card, Dustmann and Preston 2009; Hanson, Scheve and Slaughter 2007; United Nations 2009) find that older people
maintain less favorable attitudes towards immigrants
than young people, other things being equal.
The ageing of the population is increasing the needs
for services to assist elderly and grant them personal and health care. In many countries people
over 80 years of age need these services in southern European countries, because of cultural values
and lack of available public care, most of the assistance is done at home. Immigrants have become
the overwhelming majority of workers who assist
elderly people in their homes. In Italy 70 percent of
home-care jobs were taken by immigrants in 2008.
Similarly a large part of home care in Spain, Greece
and Portugal is performed by immigrants. Without
immigrant workers, the assistance of elderly people
is usually performed by the family, most likely by a
woman. Such involvement in the care of elderly
parents is likely to result in earlier retirement (typically in the age range between 50 and 65). An interesting recent study (Romiti and Rossi, 2011)
shows that in Italy the presence of immigrants significantly increased the retirement age of women
with a living elderly parent. An increase in immigrants by 4 percent of the population in a region
increased the average retirement age by one year.
Probably older people feel more vulnerable and less
inclined to changes and immigrants often may represent a change in the opportunities and customs of
the local communities. As older workers and retirees
become an increasingly important constituency,
politicians will cater more to their preferences. They
will also play to their fears. In this respect it will be
even more important to offset these ideological tendencies with more informed and fact-based considerations. If an ageing population encourages a shift
towards more demagogic anti-immigration platforms, the elderly themselves will be paying the higher economic price as they will have to forego the
important benefits described above. It will be very
important that the public discourse on immigration
brings more information and analysis of the economic benefits and less ideology to inform and empower this vulnerable group. The elderly would benefit
from more open immigration policies and therefore
should support them.
As a consequence immigrants, by providing affordable care for ageing parents, allow women in their
fifties and sixties to delay retirement age. This is
another way immigration will complement native
needs and smooth the transition towards higher retirement ages, reducing the costs of those decisions
for native families. In the elderly care sector there
should be a significant increase in the number of
visas for foreign workers. These jobs are in high demand because of the ageing population. The availability of affordable immigrant services in the sector
will encourage women to stay in the labor force and
retire later. A larger number of permits, together with
a larger visa-processing fee, and increased speed and
efficiency in granting them, will generate jobs, encourage later retirement and produce valuable public revenues.
Immigrants, the home-care sector and the retirement decisions of natives
One of the challenges of the demographic evolution
in Europe is the pressure it creates to reform the pen-
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Conclusions
Hanson, G., K. Scheve and M. Slaughter (2007). “Public Finance and
Individual Preferences over Globalization Strategies”, Economics
and Politics 19(1), 1–33.
Demographic trends are slow and are overlooked
during periods of economic turmoil and rapid
change as in the years since the financial crisis. Nevertheless they have a deep and important long-term
effect. The ageing of the population in Europe, the
low fertility and the increasing share of older people
are deeply changing our economies and societies.
Immigration that typically brings younger people represents an opportunity to reduce the adverse consequences of those demographic changes in Europe.
Immigrants will slow the growth of the ageing population, they provide jobs and services needed by an
ageing population, they complement the skills of natives and represent an important contribution to population growth. Encouraging larger immigration
flows for working purposes, by increasing the number of temporary and permanent working visas would
help Europe cope with the consequences of ageing.
At the same time ageing societies may become more
hostile to changes and, therefore, to immigrants. Raising the fees for working visas and using the revenues
to fund the pension system and local government services would help to increase further the benefits to
the receiving countries. It would also raise the political support for a larger number of working immigrants.
Hanson G. and C. McIntosh (2010), “The Great Mexican Emigration”, Review of Economics and Statistics 92(4), 798–810.
Ottaviano G. and G. Peri (2012), “Rethinking The Effects of Immigration on Wages”, Journal of the European Economic Association, in press.
Peri G. and C. Sparber (2009), “Task Specialization, Immigration
and Wages”, American Economic Journal, Applied Economics 1(3).
Romiti, A. and M. C. Rossi (2011), “Should We Retire Earlier in Order to Look after Our Parents? The Role of Immigration”, Center
for Research on Pensions and Welfare Policies Working Paper no.
124/11.
Rowthorn, R. (2008), “The Fiscal Impact of Immigration on the
Advanced Economies”, Oxford Review of Economic Policy 24(3),
560–80.
Smith J. and B. Edmonton (1997), The New Americans: Economic,
Demographic and Fiscal Effects of Immigration, National Academy Press, Washington D.C.
United Nations (2009), “Overcoming Barriers: Human mobility and
Development”, Human Development Report.
While it would be very profitable from an economic
and demographic perspective to encourage the immigration of young working people from poor countries to Europe, ideological and cultural attitudes often prevail. We economists should continue to point
out the advantages of migrations and the economic
costs of the ideological positions that restrict the inflow of working immigrants. Europe needs to have
immigration policies that take into account these
long-term trends and are based on factual information and economic considerations that move beyond
the ideological and “emergency” approach it has
taken so far.
References
Card D., C. Dustmann, I. Preston (2009), “Immigration, Wages, and
Compositional Amenities”, NBER Working Papers no. 15521, National Bureau of Economics Research, Cambridge MA.
Card D. and T. Lemieux (2001), “Can Falling Supply Explain The
Rising Return To College For Younger Men? A Cohort-Based Analysis”, The Quarterly Journal of Economics 116(2).
Docquier F., C. Ozden and G. Peri (2010), “The Wage Effect of
Immigration and Emigration”, NBER Working Paper no. 16646.
Hatton T. and J. Williamson (2009), “Vanishing Third World Immigrants?”, Manuscript, Harvard University.
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